2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-15-2011

Leap Systems Inc v. Moneytrax Inc

Precedential or Non-Precedential: Precedential

Docket No. 10-2965

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 10-2965

No. 10-3107

_____________

LEAP SYSTEMS, INC.

v.

MONEYTRAX, INC.; NORMAN BAKER

TODD LANGFORD (Intervenor in D.C.)

Todd Langford, Appellant in 10-2965

Leap Systems, Inc., Appellant in 10-3107

 

_____________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 05-cv-01521)

District Judge: Honorable Freda L. Wolfson

______________

Submitted Under Third Circuit LAR 34.1(a)

February 17, 2011
2

Before: SLOVITER and HARDIMAN, Circuit Judges and 

JONES, II,* District Judge.

(Filed: March 15, 2011)

Walter J. Fleischer, Jr.

Heather M. Hughes

Melissa L. Klipp

Drinker, Biddle & Reath 

500 Campus Drive 

4th Floor 

Florham Park, NJ 07932-0000 

Attorneys for Appellee in 10-2965/Cross Appellant in 10-3107

Jeffrey D. Ullman

Ullman, Furhman, Broeman & Platt 

89 Headquarters Plaza 

North Tower, 12th Floor 

Morristown, NJ 07960-0000

Attorney for Appellant in 10-2965/Cross Appellee in 10-3107

__________________

OPINION OF THE COURT

__________________

HARDIMAN, Circuit Judge.

 

*The Honorable C. Darnell Jones, II, District Judge for 

the United States District Court for the Eastern District of 
3

Petitioner Todd Langford appeals the District Court’s 

order denying his motion to unseal portions of a judicial record 

containing the terms of a confidential settlement agreement. We 

will affirm.

I

This action began in 2005, when LEAP Systems, Inc. 

(LEAP), an insurance licensor, sued Norman Baker, a licensee 

affiliated with the company, and Baker’s new employer, 

MoneyTrax, Inc. (MoneyTrax). LEAP sought damages for, 

inter alia, misappropriations of proprietary and confidential 

information, breach of contract, and breach of fiduciary duty. 

The District Court held a settlement conference on March 25, 

2008, at which the parties reached two separate settlement 

agreements, one between LEAP and Baker, and the other 

between LEAP and MoneyTrax. These agreements settled all 

outstanding disputes among the parties.

To ensure that the settlement agreements “would not fall 

apart as soon as the parties left the courthouse,” Baker’s attorney 

asked to read into the record the terms of the agreements. At 

approximately 6:30 that evening, after all the court reporters had 

left for the day, District Judge Freda Wolfson brought the parties 

to the courtroom of Magistrate Judge Tonianne Bongiovanni, 

which was equipped with audio recording capabilities. 

Although Judge Wolfson stated a number of times that the terms 

were being placed “on the record,” she ensured the parties that 

she would not file a transcript of the proceeding and suggested 

that no confidential terms be included in the parties’ proposed 

 

Pennsylvania, sitting by designation.
4

order to dismiss. When the parties inquired as to whether the 

transcript from the proceeding would be sealed, Judge Wolfson 

explained that because the proceeding was “not being 

transcribed as part of a court document,” there would be no 

reason to seal its contents.

On April 4, 2008, the District Court dismissed the action 

with prejudice, “subject to the terms, conditions and provisions” 

of the parties’ settlement agreements. The District Court 

expressly retained jurisdiction to enforce the parties’ 

agreements, and ordered that the “terms of the Agreement[s] 

placed on the record on March 25, 2008 . . . not be made public 

and kept confidential until the Court has the opportunity to 

review a formal motion to seal.” Leap Sys. v. Moneytrax, Inc., 

No. 05-1521 (D. N.J. April 4, 2008) (order dismissing with 

prejudice). One week after the case was dismissed, LEAP filed 

a motion to seal pursuant to New Jersey District Court Local 

Civil Rule 5.3.1 LEAP’s attorney, Melissa Klipp, filed a 

declaration in conjunction with that motion, in which she 

averred that portions of the March 25, 2008 transcript contained 

“sensitive business information.” She also claimed that 

“[d]isclosure . . . would render LEAP at a tactical 

disadvantage,” and that “one of LEAP’s primary competitors 

 

1

Local Rule 5.3 states, in relevant, part:

Any motion to seal or otherwise restrict public access 

shall be available for review by the public. The motion 

papers shall describe (a) the nature of the materials or 

proceedings at issue, (b) the legitimate private or public 

interests which warrant the relief sought, (c) the clearly 

defined and serious injury that would result if the relief 

sought is not granted, and (d) why a less restrictive 

alternative to the relief sought is not available.
5

has already made direct requests to the Court seeking the 

information on the tape recording.” Sealing those portions of 

the transcript containing confidential proprietary information, 

Klipp declared, “would be the least restrictive means of 

protecting LEAP against imminent harm.” Neither Baker nor 

MoneyTrax opposed LEAP’s motion to seal.

On May 9, 2008, the District Court entered an order 

sealing those portions of the transcript memorializing the terms 

of the parties’ settlement agreements. Recognizing that “the 

right to inspect and copy judicial records is not absolute,” the 

District Court considered whether LEAP had satisfied its burden 

under Local Rule 5.3 of showing that a seal was necessary to 

protect its legitimate interests. Leap, No. 05-1521 (D.N.J. May 

9, 2008) (order to seal) (citing Nixon v. Warner 

Communications, Inc., 435 U.S. 589 (1978)). The Court found 

that LEAP’s interest in maintaining the confidentiality of 

sensitive business information was legitimate, and that LEAP 

was reasonably concerned that competitors would use this 

information to its disadvantage. It thus concluded that LEAP 

had met its burden, and ordered the record sealed. The District 

Court also noted that the transcript was “only meant to serve as a 

reference for the parties when they drafted the actual 

agreements” and was not a part of the judicial record. Id. 

Nevertheless, on May 27, 2008, the transcript was filed with the 

Clerk of Court for the District of New Jersey.

Within a month, the parties had resumed litigation, and 

the District Court entered three consecutive show-cause orders 

directing LEAP to comply with the terms of its settlement 

agreement with Baker. In response, LEAP claimed that Baker 

had misappropriated confidential proprietary information and 

used it to develop a “software calculator” with his friend and 
6

colleague Todd Langford. Although LEAP eventually settled its 

dispute with Baker, it continued to pursue its misappropriation 

claim against Langford in state court. Langford in turn filed a 

motion to intervene in the District Court proceeding and to 

unseal, under the “right of access” doctrine, portions of the 

March 25, 2008 transcript, which he claims are essential to 

establishing his defense in state court. The Magistrate Judge 

granted Langford’s motion to intervene, but denied him access 

to the sealed portions of the transcript. Citing the District 

Court’s order of May 9, 2008, the Magistrate Judge found that 

the transcript was not a “judicial record,” and thus “[n]either 

Langford nor any other member of the public has a legitimate 

right” to access it. Leap, No. 05-1521 (D.N.J. Sept. 24, 2009)

(letter order from magistrate judge).

The District Court affirmed the Magistrate Judge’s 

recommendation but rejected its finding that the transcript was 

not a judicial record. By placing the terms of the settlement 

agreements on the record, the Court explained, the parties had 

transformed a private contract into a public document. Leap, 

2010 U.S. Dist. LEXIS 53167, *19-20 (D.N.J. Sept. 24, 2009)

(citing Jackson v. Del. River & Bay Auth., 224 F. Supp. 2d 834, 

839 (D.N.J. 2002)). The Court also noted that a “presumptive 

right of access” arose when the document was filed with the 

Clerk of Court on May 27, 2008. Id. at *20 (citing Leucadia v. 

Applied Extrusion Techs., Inc., 998 F.3d 157, 161-62 (3d Cir. 

1993)).

Nevertheless, the District Court found that LEAP’s 

interest in preventing competitors from using the proprietary 

information in the transcript to “unfairly compete,” coupled with 

its reliance on the Court’s assurance of confidentiality, 

outweighed Langford’s personal interest in litigating his claim 
7

in state court. Id. at *22-30. Accordingly, the Court denied 

Langford’s motion to unseal those portions of the transcript 

containing the terms of the settlement agreements. Langford 

filed this timely appeal.

II

We have jurisdiction over the District Court’s final order 

pursuant to 28 U.S.C. § 1291, and review its denial of 

Langford’s motion to unseal for abuse of discretion. Pansy v. 

Borough of Stroudsburg, 23 F.3d 772, 783-84 (3d Cir. 1994). 

We exercise plenary review over the District Court’s legal 

determination regarding the definition and scope of a “judicial 

record.” Id.

A

Langford sought to unseal portions of the March 25, 2008 

transcript pursuant to his common law right of access to judicial 

proceedings and judicial records, a right which we have held is 

“beyond dispute.” Littlejohn v. Bic Corp., 851 F.2d 673, 677-78 

(3d Cir. 1988). The common law right of access antedates the 

Constitution, and its purpose is to “promote[] public confidence 

in the judicial system by enhancing testimonial trustworthiness 

and the quality of justice dispensed by the court.” Id. Hence, a 

“strong presumption” in favor of accessibility attaches to almost 

all documents created in the course of civil proceedings. See 

Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1070 (3d Cir. 

1984) (“Public access to civil trials, no less than criminal trials, 

plays an important role in the participation and the free 

discussion of governmental affairs.”); United States v. Martin, 

746 F.2d 964, 968 (3d Cir. 1984) (“The common law right of 

access is not limited to evidence, but rather encompasses all 
8

judicial records and documents. It includes transcripts, 

evidence, pleadings, and other materialssubmitted by litigants . . 

. ”) (citations and quotation marks omitted).

An exception is made, however, for documents which 

have not been “filed with, . . . interpreted or enforced by the 

district court.” Pansy, 23 F.3d at 781. For instance, settlement 

agreements reached without court assistance or intervention will 

not be treated as “judicial records” for purposes of the “right of 

access” doctrine. Enprotech Corp. v. Renda, 983 F.2d 17, 20-21 

(3d Cir. 1993); cf., Bank of Am. & Nat’l Trust v. Hotel 

Rittenhouse Assocs., 800 F.2d 339, 345 (3d Cir. 1986) (“Once a 

settlement is filed in the district court, it becomes a judicial 

record, and subject to the access accorded such records.”). 

Moreover, a confidential settlement agreement will not be 

transformed into a “judicial record” simply because the court 

seals its contents from public view. Pansy, 23 F.3d at 781.

The District Court initially stated that the sealed 

document was not a judicial record. Upon closer review, 

however, the Court determined that the transcript, which had 

been recorded in open court, transcribed and filed with the Clerk

of Court, and enforced in subsequent litigations, must be 

regarded as a judicial document for purposes of determining the 

public’s right of access. We agree.

In Rittenhouse, we held that “the court’s approval of a 

settlement or action on a motion are matters which the public 

has the right to know about and evaluate.” 800 F.2d at 344. 

Thus, “settlement documents can become part of the public 

component of a trial” under either of two circumstances: (1) 

“when a settlement is filed with a district court;” and (2) “when 

the parties seek interpretative assistance from the court or 
9

otherwise move to enforce a settlement provision.” See 

Enprotech, 983 F.2d at 20 (citing Rittenhouse, 800 F.2d at 343-

44).

Both circumstances are present in this case. The 

transcript was filed with the Clerk of Court on May 27, 2008, 

and listed as Document No. 54 on the District Court’s docket.2 

In addition, the parties specifically requested at the March 25, 

2008 proceeding that the District Court retain jurisdiction to 

interpret and enforce the terms of the settlement agreements. 

See Rittenhouse, 800 F.2d at 345 (“Having undertaken to utilize 

the judicial process to interpret the settlement and to enforce it, 

the parties are no longer entitled to invoke the confidentiality 

ordinarily accorded settlement agreements.”). In its order of 

dismissal, the District Court specifically directed compliance 

with the “terms, conditions and provisions” of the parties’ 

agreements. Cf. Enprotech, 983 F.2d at 21 (finding no right of 

access to a settlement agreement where the court order referred 

to “the parties’ stipulation of dismissal and not their compliance 

with the terms and conditions of . . . [their] settlement 

agreement”). Although the MoneyTrax-LEAP agreement has 

 

2

LEAP claims a copy of the transcript was filed with the 

Clerk by mistake and has since been removed from the docket. 

In Littlejohn, we held that discovery documents which were 

once filed with the court lost their status as “judicial records” 

when they were returned to counsel after the case was 

dismissed. 851 F.2d at 682. Unlike in Littlejohn, here, the facts 

regarding when and where the document was filed remain in 

dispute. We find no clear error, however, in the District Court’s 

reliance on docket entry number 54, which states that the 

transcript of the March 25, 2008 proceedings “is maintained in 

paper format on file in the Clerk’s Office.”
10

yet to be revisited, the District Court has demonstrated its 

willingness to enforce the Baker-LEAP agreement on several 

occasions.

Lastly, we are persuaded by the Seventh Circuit’s 

reasoning in Jessup v. Luther, 277 F.3d 926 (7th Cir. 2002), that 

“the public has an interest in knowing what terms of settlement a 

federal judge would approve and perhaps therefore nudge the 

parties to agree to.” Id. at 929. Judges play an essential role in 

the settlement process, as “litigants may negotiate with more 

confidence if they know that a neutral third party, namely the 

judge presiding over their case, will look over the settlement 

agreement and note any ambiguities or other flaws in it that 

might frustrate or complicate its enforcement should the parties 

ever come to blows over its meaning.” Id. Indeed, the facts of 

this case perfectly illustrate the point. Before Judge Wolfson’s 

intervention, the parties had engaged in two years of “bitterly 

contested” pre-trial practice, followed by a year of mediation. 

“Only after [the District] Court’s intervention and assistance[] 

did the parties finally agree[] to a set of specific terms.” Leap, 

2010 U.S. Dist. LEXIS 53167 at *19. Although the District 

Court’s involvement in the negotiation process may not by itself 

have transformed the confidential settlement agreements into 

publicly-available judicial documents, it certainly weighs in 

favor of this outcome.

For these reasons, the District Court did not err when it 

held that the transcript is a judicial document subject to the 

common law “right of access” doctrine.

B

Although the right of access to judicial records is 
11

“beyond dispute,” it is not absolute. Nixon v. Warner 

Commc’ns, 435 U.S. 589, 598 (1978). “Every court has 

supervisory power over its own records and files, and access has 

been denied where court files might have become a vehicle for 

improper purposes.” Id. Thus, while we recognize a strong 

presumption in favor of public accessibility, we also permit the 

sealing of documents when justice so requires. However, “[t]he

burden is on the party who seeks to overcome the presumption 

of access to show that the interest in secrecy outweighs the 

presumption.” In re Cendant Corp., 260 F.3d 183, 190 (3d Cir. 

2001).

Langford claims the District Court abused its discretion 

in denying him the right to access a judicial record based on 

little more than LEAP’s vague assertions that the transcript 

contains “secretive business information,” and that disclosure 

would “render LEAP at a tactical disadvantage.” We agree that 

LEAP’s “[b]road allegations of harm, bereft of specific 

examples or articulated reasoning,” are insufficient, on their 

own, to establish a strong interest in maintaining confidentiality. 

In re Cendant Corp., 260 F.3d at 194. Nor can a district court 

“rely on the general interest in encouraging settlement” to justify 

the sealing of an agreement which the parties mistakenly 

believed would remain confidential. Id.; see also Rittenhouse, 

800 F.2d at 346 (“[T]he generalized interest in encouraging 

settlements does not rise to the level of interests that we have 

recognized may outweigh the public’s common law right of 

access.”).

Here, however, the District Court’s decision to deny 

Langford’s motion was based on more than LEAP’s broad 

assertions of financial injury and a generalized concern about 

discouraging settlement agreements. Rather, the District Court 
12

specifically found that LEAP would not have entered into the 

settlement agreements but for the Court’s assurance of 

confidentiality. See Pansy, 23 F.3d at 790 (finding that, in most 

cases, “settlements will be entered into . . . whether or not 

confidentiality can be maintained,” but that a party’s reliance on 

an order sealing a judicial document “should depend on the 

extent to which the order induced the party to allow discovery or 

to settle the case”).

The record provides ample support for the District 

Court’s finding. As the transcript reflects, LEAP’s attorney 

asked the Court several times during the March 25, 2008 

proceeding whether the recording would remain confidential. 

The Court assured the parties that the transcript would not be 

filed and that the terms of the agreements would not be 

disclosed in its order dismissing the case. When the parties 

asked whether the Court would seal the contents of the 

transcript, they were told that a sealing order would not be 

necessary to ensure the document’s confidentiality. Under these 

circumstances, we find LEAP’s reliance on the District Court’s 

assurances of confidentiality entirely reasonable and sufficient 

to outweigh the public’s common law right of access. See also 

Gambale v. Deutsche Bank AG, 377 F.3d 133, 144 (2d Cir. 

2004) (holding that the details of a confidential settlement 

agreement disclosed during “a relatively informal conference 

relating to settlement,” on the basis of the court’s “assurances of 

confidentiality,” warranted only a “weak” presumption of public 

access).

Having found LEAP’s privacy interest significant, we 

now turn to the public’s interest in disclosure. “Circumstances 

weighing against confidentiality exist when confidentiality is 

being sought over information important to public health and 
13

safety, and when the sharing of information among litigants 

would promote fairness and efficiency.” Pansy, 23 F.3d at 777 

(internal citations omitted). Moreover, we are more likely to 

require disclosure when “a party benefitting from the order of 

confidentiality is a public entity or official,” or when the judicial 

record “involves matters of legitimate public concern.” Id. at 

778, 788. The District Court considered these factors, and 

found the public’s interest in disclosure minimal. The parties 

are private entities, their dispute has no impact on the safety and 

health of the public, and their settlement agreements 

demonstrate a clear intent to maintain confidentiality.

Weighing these factors against LEAP’s strong privacy 

interest, the District Court held that the presumption in favor of 

public accessibility had been rebutted. This finding was not an 

abuse of discretion. Accordingly, we will affirm the order of the 

District Court.